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What the Numbers Say: Examining the Decline in Capital Replacement and Term Debt Repayment Margins for Illinois Grain Farms

  • Gerald Mashange
  • Department of Agricultural and Consumer Economics
  • University of Illinois
  • Bradley Zwilling
  • Illinois FBFM Association and Department of Agricultural and Consumer Economics
  • University of Illinois
October 31, 2025
farmdoc daily (15):201
Recommended citation format: Mashange, G. and B. Zwilling. "What the Numbers Say: Examining the Decline in Capital Replacement and Term Debt Repayment Margins for Illinois Grain Farms." farmdoc daily (15):201, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 31, 2025. Permalink

The farm machinery and equipment market faces several headwinds. Unit sales and inventory levels are down, as manufacturers scale back production in response to weak demand. At the same time, there are signs of deteriorating credit quality at captive finance arms—such as John Deere Capital Corporation and CNH Industrial Capital LLC—alongside a softening in loan volumes at commercial banks to finance these purchases (see farmdoc daily, October 24, 2025). Together, these factors point to a challenging environment for dealers, manufacturers, and producers.

In this article, we focus on the producer and extend our analysis by examining the Capital Replacement and Term Debt Repayment Margin (CRTDR margin) using data from the Illinois Farm Business Farm Management Association (FBFM). This repayment capacity measure represents the funds remaining after covering family living expenses, taxes, and principal and interest payments on term debt and/or capital leases in order to demonstrate a producer’s ability to replace capital assets, such as farm machinery and equipment, or take on additional term debt with maturities greater than one year. Since the CRTDR margin is a dollar value and is impacted by the production and scale of the farm enterprise, along with the producer’s management abilities, it cannot be compared across farm businesses nor can it be standardized into quality scores (i.e., we cannot score it as vulnerable, satisfactory, or strong). For our analysis, however, we will simply report the quartile levels of the CRTDR margin for grain farms only to illustrate its general distribution and how it varies by the scale of the operation. Importantly, what is revealed in this article is the substantial reduction in repayment capacity in recent years, which partly helps us explain some of the issues we’ve seen in the farm machinery and equipment market from the perspective of borrowers.

To do this, we compare the lower-quartile, median, and upper-quartile values of this measure across small, medium-sized, and large grain farms. We define small grain farms as those with gross farm returns less than $350,000, medium-sized farms as those with returns between $350,000 and $999,999, and large farms as those with returns greater than $999,999. The lower quartile is the 25th percentile—the value below which one-quarter of grain farms’ CRTDR margins fall. The median (50th percentile) marks the midpoint, and the upper quartile (75th percentile) is the point above which one-quarter of grain farms’ CRTDR margins fall. Taken together, the quartiles summarize the distribution of the CRTDR margin from more constrained (lower quartile) to more unconstrained (upper quartile) operations. A figure showing average CRTDR margins across more granular farm size categories is provided in the appendix.

Small Grain Farms

Figure 1 shows the CRTDR margin for small grain farms from 2018 to 2024. The 25th percentile (lower quartile) mainly remained negative throughout the period, reflecting limited repayment capacity for the most financially constrained operations. Although it briefly turned positive between 2021 and 2022 due to record net farm incomes during this time, this improvement was modest and short-lived, with values well below those at the median and upper quartile levels. After peaking at $15,506 in 2021, the lower quartile CRTDR margin dropped sharply to -$55,110 in 2023 and continued to decline to -$74,978 in 2024.  The combined average net farm income for 2023 and 2024 was the lowest two-year number since 2015 and 2016.  The median margin exhibited a similar trend to the lower quartile, although its values were relatively higher throughout the period. After rising and peaking at $59,648 in 2021, the figure fell to $43,707 in 2022, then turned negative in 2023 at -$13,661, and declined further to -$24,976 in 2024. The decrease in CRTDR from 2021 to 2022 is notable, given that the average accrual net farm income for all farms increased from 2021 to 2022.  Rising interest rates on term debt, as well as differences in average net income amongst the different groups, could be two potential reasons. Even the 75th percentile (upper quartile), which maintained positive margins throughout the period, experienced significant declines in the latter years. From a high of $101,949 in 2021, the upper quartile fell to $21,365 by 2024.  Even with average net farm income dropping from 2023 to 2024, the upper quartile stayed about the same.

Figure 1 is a grouped bar chart titled "Capital Replacement and Term Debt Repayment Margins for Small Grain Farms." The x-axis shows years from 2018 to 2024. The y-axis shows dollar values ranging from approximately –$80,000 to $120,000. For each year, three bars are grouped side-by-side: blue for the lower quartile (25th percentile), orange for the median (50th percentile), and green for the upper quartile (75th percentile). Dollar labels appear above positive bars and below negative bars in matching colors. Light gray vertical bands (50% transparent) alternate behind even-numbered years (2020, 2022, 2024) for visual separation. Values by year: • 2018: Lower –$19,083, Median $10,774, Upper $40,155 • 2019: Lower –$37,193, Median –$5,637, Upper $22,739 • 2020: Lower –$1,646, Median $28,871, Upper $55,678 • 2021: Lower $15,506, Median $59,648, Upper $101,949 • 2022: Lower $3,018, Median $43,707, Upper $80,673 • 2023: Lower –$55,111, Median –$13,661, Upper $21,670 • 2024: Lower –$74,978, Median –$24,976, Upper $21,365 The lower quartile is negative in all years except 2021 and 2022. The median is positive in 2018, 2020, 2021, and 2022 but negative in 2019, 2023, and 2024. The upper quartile remains positive but declines after 2021. This indicates that even top-performing small grain farms generate limited cash for machinery replacement or additional term debt, while the majority face persistent shortfalls—especially in 2023 and 2024. The note states: "Small farms are defined as those with gross farm returns of less than $350,000."

Medium-size Grain Farms

Figure 2 shows the CRTDR margin for medium-sized grain farms across the same period. Naturally, these values are greater in magnitude since these farms are larger in terms of gross farm returns. The 25th percentile (lower quartile) peaked at $90,731 in 2022 and became negative the following year, falling to -$107,957 in 2023 and further to -$125,799 in 2024, due to significantly lower incomes, as seen for the small grossing farms. Unlike the small farms and the other quartiles for medium-sized farms, the CRTDR margin increased from 2021 to 2022, as did the average net farm income. Similarly, the median margin fell from $155,293 in 2022 to a negative margin of -$28,428 in 2023 and fell further to -$36,953 in 2024. The 75th percentile (upper quartile) also dropped sharply, falling from a high of $225,834 in 2022 to $43,251 in 2024, but remained positive across the entire period. As we saw for the small farms, there was also a less significant decrease in the CRTDR margin from 2023 to 2024 for the upper quartile.

Figure 2 is a grouped bar chart titled "Capital Replacement and Term Debt Repayment Margins for Medium-sized Grain Farms." The x-axis shows years from 2018 to 2024. The y-axis shows dollar values ranging from approximately –$150,000 to $260,000. For each year, three bars are grouped side-by-side: blue for the lower quartile, orange for the median, and green for the upper quartile. Dollar labels appear above positive bars and below negative bars in matching colors. Light gray vertical bands (50% transparent) alternate behind even-numbered years. Values by year: • 2018: Lower –$1,744, Median $50,574, Upper $113,638 • 2019: Lower –$57,658, Median $3,572, Upper $66,285 • 2020: Lower $43,344, Median $101,456, Upper $163,782 • 2021: Lower $84,356, Median $162,390, Upper $242,915 • 2022: Lower $90,731, Median $155,293, Upper $225,834 • 2023: Lower –$107,957, Median –$28,428, Upper $47,178 • 2024: Lower –$125,799, Median –$36,953, Upper $43,251 The lower quartile is negative in 2019, 2023, and 2024 but positive in 2020–2022. The median follows a boom-bust cycle: peaking at $162,390 in 2021, then turning negative in 2023 and 2024. The upper quartile grows through 2021 before declining. This shows that while top medium farms retained capacity for capital investment through 2022, the majority now face cash constraints that could delay equipment upgrades. The note states: "Medium-sized grain farms are defined as those with gross farm returns between $350,000 and $999,999."

Large Grain Farms

Figure 3 shows the CRTDR margin for large grain farms, which reported the highest repayment capacity levels across the board—but also the steepest absolute declines. The 25th percentile (lower quartile) fell from a positive margin of $254,931 in 2022 to -$184,523 in 2023 and -$240,260 in 2024. This represents a nearly half-million-dollar swing in just two years for the most financially constrained large farms. The drop in the CRTDR margin corresponds with the significant decrease in the average net farm income observed for all farms during this period. The median CRTDR margin, which peaked at $409,150 in 2022, declined sharply to -$82,541 in 2024. At the 75th percentile, repayment capacity remained positive across the entire period. After reaching a high of $653,600 in 2022, the margin fell to $123,711 in 2023—a decline of almost $530,000 that was greater than the lower quartile—before slipping again by a lesser amount to $100,050 the following year. Unlike the other-sized farms, all quartiles for large farms increased their respective CRTDR margin from 2021 to 2022, just as the average net farm income for all farms did.

Figure 3 is a grouped bar chart titled "Capital Replacement and Term Debt Repayment Margins for Large Grain Farms." The x-axis shows years from 2018 to 2024. The y-axis shows dollar values ranging from approximately –$260,000 to $700,000. For each year, three bars are grouped side-by-side: blue for the lower quartile, orange for the median, and green for the upper quartile. Dollar labels appear above positive bars and below negative bars in matching colors. Light gray vertical bands (50% transparent) alternate behind even-numbered years. Values by year: • 2018: Lower $75,511, Median $181,553, Upper $287,663 • 2019: Lower –$53,220, Median $57,393, Upper $181,519 • 2020: Lower $162,827, Median $276,137, Upper $439,604 • 2021: Lower $250,153, Median $403,642, Upper $601,966 • 2022: Lower $254,931, Median $409,150, Upper $653,600 • 2023: Lower –$184,523, Median –$29,631, Upper $123,711 • 2024: Lower –$240,260, Median –$82,541, Upper $100,050 The lower quartile is positive in 2018, 2020, 2021, and 2022 but negative in 2019, 2023, and 2024. The median grows from $181,553 in 2018 to a peak of $409,150 in 2022, then turns negative in 2023 and 2024. The upper quartile reaches $653,600 in 2022 before falling. Despite scale advantages, large grain farms experienced the sharpest reversal in repayment capacity, driven by commodity price declines and input cost inflation. The note states: "Large grain farms are defined as those with gross farm returns greater than $999,999."

Conclusion

The sharp decline in capital replacement and term debt repayment margins across all farm sizes—especially since 2022—indicates a broad and rapid deterioration in the repayment capacity of grain farms. This corresponds with the change in the average net farm income during this period.  Another factor in this calculation is family living expenses, which have been increasing. From 2018 to 2024, the average family living expense (including contributions, medical, life insurance, expendables, and family living capital) increased by 24%, or over $20,000. Most of this increase occurred in 2021, following a 14% rise from 2020 to 2021. From 2018 to 2024, off-farm income also increased by 45%, or over $20,000, with much of this increase occurring between 2022 and 2023, rising by 16%. What is most striking is not just that the lower quartiles turned negative, but that even the median and upper quartile values fell substantially. This indicates that the decline in producers’ ability to replace capital assets and take on new term debt is widespread. The negative quartile CRTDR margins shown in this article are supported by FBFM family living studies, which have shown the average farm also has negative numbers after deducting family living and income taxes  from all income (both farm and non-farm)  for 2023 and 2024. The deterioration in CRTDR margins (which is negative for the lower and median quartiles for all size farms in 2023 and 2024) helps explain the decline in demand for farm machinery and equipment in recent years, as well as the decline in loan volumes issued by commercial banks.

Acknowledgment

The authors would like to acknowledge that data used in this study comes from the Illinois Farm Business Farm Management (FBFM) Association. Without Illinois FBFM, information as comprehensive and accurate as this would not be available for educational purposes. FBFM, which consists of 5,000+ farmers and 70 professional field staff, is a not-for-profit organization available to all farm operators in Illinois. FBFM field staff provide on-farm counsel along with recordkeeping, farm financial management, business entity planning and income tax management. For more information, please contact our office located on the campus of the University of Illinois in the Department of Agricultural and Consumer Economics at 217-333-8346 or visit the FBFM website at www.fbfm.org.

References

Mashange, G. "The Current State of the Farm Machinery and Equipment Market." farmdoc daily (15):197, Department of Agricultural and Consumer Economics, University of Illinois at Urbana-Champaign, October 24, 2025.

Appendices

Figure A1 is a line chart showing the average Capital Replacement and Term Debt Repayment Margin (CRTDR Margin) for grain farms from 2018 to 2024, grouped into ten farm size ranges based on gross farm returns. The x-axis lists the years 2018 through 2024. The y-axis shows dollar values, ranging from approximately –$80,000 to $460,000. Ten separate lines, each representing a different farm size range, track the average CRTDR Margin over time. The farm size ranges, from smallest to largest, are: $40,000–$140,000, $140,000–$240,000, $240,000–$340,000, $340,000–$440,000, $440,000–$540,000, $540,000–$640,000, $640,000–$740,000, $740,000–$840,000, $840,000–$940,000, and $940,000 and above. Overall Trend: All farm size groups experienced a rise in average CRTDR Margin from 2018 to 2022, followed by a sharp decline in 2023 and 2024. The peak occurred in 2022 for most groups, with the largest farms reaching the highest values. By Farm Size: • Smallest farms ($40,000–$140,000): The line stays negative in all years except 2021 and 2022, where it briefly rises above zero. It ends at –$18,050 in 2024. • $140,000–$240,000 and $240,000–$340,000: These lines remain mostly negative or near zero, with small positive peaks in 2021–2022. • Mid-range farms ($340,000–$740,000): These show moderate growth, peaking between $90,000 and $178,000 in 2022, then dropping to negative values by 2024. • Larger farms ($740,000–$940,000 and $940,000+): These lines climb steeply, with the $940,000+ group reaching $461,143 in 2022—the highest point on the chart—before falling to –$80,339 in 2024. Key Observations: • Larger farms consistently have higher average CRTDR Margins than smaller ones during 2018–2022. • All size groups end 2024 with negative averages, with the decline most severe for the largest farms. • The chart includes light, semi-transparent gray vertical bands behind even-numbered years (2020, 2022, 2024) to help distinguish time periods. This pattern indicates that while larger grain farms generated substantial cash for machinery replacement and debt service during strong market years, all size groups now face repayment shortfalls, limiting capital investment capacity.

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